The Morning Call
9/15/17
The
Market
Technical
The indices
(DJIA 22203, S&P 2495) turned in a mixed performance yesterday (Dow up,
S&P down) with the DJIA finally closing above its August high. Volume rose; breadth continued strong. Both remain above their 100 and 200 day
moving averages and are in uptrends across all time frames.
The VIX (10.5)
was off pennies, leaving it below the upper boundary of its short term
downtrend, below its 100 day moving average (reverting back to resistance),
below its 200 day moving average for a fourth day, reverting to resistance and
above the lower boundary of a developing very short term uptrend. The question
as to whether or not the VIX has bottomed remains open.
The long
Treasury rebounded, finishing above its 100 and 200 day moving averages (both
support) and the lower boundaries of its short term trading range and its long
term uptrend but below the resistance level marked by its August high.
The dollar was
down, remaining in short term and very short term downtrends and below its 100
and 200 day moving averages and in a series of seven lower highs.
GLD rose, ending
above the lower boundaries of its short term and very short term uptrends,
above its 100 and 200 day moving averages (both support) and has made a fourth
higher low.
Bottom line:
long term, the indices remain strong viz a viz their moving averages and
uptrends across all timeframes. Short term, the Dow closed above the resistance
level marked by its August high, putting it back in sync with the S&P.
On the other
hand, all those Monday gap openings among the major indices still need to be
closed. Finally, the unambiguous
performances of TLT, GLD and UUP continue to point at a weakening economy.
I remain
uncomfortable with the overall technical picture.
Fundamental
Headlines
The
economic data was mixed yesterday: weekly jobless claims declined versus
expectations of an increase; the August CPI was a tad hotter than anticipated
though the number ex food and energy was in line.
Much media time
and print space was wasted wondering whether the CPI stat was the sign that
inflation was at last starting to move towards the Fed’s 2% objective. News flash, one datapoint does not a trend
make. Most likely this news chatter was
spawned by the hawkish statements from the Bank of England and its governor
Mark Carney.
That
said, the BOE left rates and its bond buying program unchanged; and I should
point out that [a] like our own beloved Fed, these guys have threatened
monetary normalization in the past and then done nothing and [b] the fixed
income crowd seemed unimpressed as the long Treasury rose in price {declined in
yield}.
Other
overseas economic news was headlined by the August Chinese retail sales,
industrial production and fixed investment numbers falling short of
estimates. As you know, the Chinese
economic data has been improving of late---to the point where I was considering
removing it from the ‘muddle through’ scenario.
These stats clearly put that notion on hold.
***overnight,
North Korea fired another missile overflying Japan. The world yawns.
http://www.zerohedge.com/news/2017-09-14/north-korea-fires-ballistic-missile-which-passes-over-japan
The
rest of the day was consumed with Washington and the media parsing the meaning
of ‘agreement’, ‘deal’ and ‘the wall’ following a meeting Wednesday night
between Trump and the dems focused on reaching an agreement on the status of
‘dreamers’ and funding the wall. Here
are the links covering the issue. The
issue being whether Trump gave up funding for the wall and agreed to allow the
‘dreamers’ to stay.
Clearly, no one
except the participants know what was said; though we are sure to find out near
term. At this point, my only observation
this is that it is one thing for the Donald to let the GOP know that he will
negotiate with the opposition if the GOP can’t come up with achieving a goal
(read debt ceiling and tax reform) and quite another to cut a deal (on the wall
and the dreamers) before having given the GOP a chance to come up with a
solution. In other words, the best way
to accomplish his agenda, in my opinion, is to push the GOP into a compromise
within itself versus pissing them off and risk getting nothing.
Bottom line: I
am not sure what to make of the hawkish narrative out of the BOE. History says this chatter is not worth
much. On the other hand, if the BOE
becomes the first major central bank to start normalization, the question is
how far behind will the other banks be? And
specifically with the Fed, if we also get some sort of stimulative tax reform,
the situation would set up for it to take the opportunity to start unwinding
QE.
You know my
point here: when, as and if QE starts to unwind, so does asset mispricing and misallocation.
My
thought for the day: adverse markets come and go, as do market liquidity and
confidence, but it is a universal truth that long-term investments (not
speculations) are better made in adverse markets than in euphoric markets
because good values are more pervasive. The question is not when and by how
much something might go up, but what the risk is and how much you get paid to
take it! And everything has risk of some kind, including cash and CDs;
one just needs to pick the risks that are best to take.
Subscriber Alert
Schlumberger
(SLB-$67) stock price has been cut in half and is now in its Buy Value
Range. Accordingly, at the Market, the Aggressive
Growth Portfolio will Add to its position.
Investing for Survival
The
problem with investing apathy.
News on Stocks in Our Portfolios
Revenue of $9.21B (+7.0% Y/Y) beats by $180M.
Economics
This Week’s Data
August
retail sales fell 0.2% versus expectations of +0.1%; ex autos, it rose 0.2%
versus forecasts of +0.5%.
The
September NY Fed manufacturing index was reported at 24.4 versus consensus of
19.0.
Other
Politics
Domestic
The wall---deal
or no deal?
International War Against Radical
Islam
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